At a bitcoin conference in Miami this January, Jeffrey Tucker, a laissez-faire economist and libertarian icon, made an unexpected observation. “There are people in this room who would think bitcoin is a little old-fashioned,” he quipped. Well, that was fast. After all, it was only five years ago that bitcoin appeared on the scene and provided the world with the first open-source, decentralized alternative to government controlled currencies. And it’s really only in the last year that bitcoin has begun to gain traction as a payment option.

Now bitcoin faces competition. Hundreds of bitcoin knockoffs—“altcoins,” as they are commonly called—have been built.

The software that underpins bitcoin is open-source, so anyone can copy and tweak the code to create their own digital currency. You can even pay someone to do it for you: The owner of a Web site called Coingen, for example, promises to start a new bitcoin clone for anyone who pays a fee of 0.05 bitcoin. All you have to do is give it a name.

Some of these new altcoins are truly innovative. People have made bitcoin versions that process transactions faster, consume less energy or better protect user privacy. Other iterations differ from bitcoin only in their branding and implementation. For example, a few altcoins are intended to serve specific geographical communities. Last month an altcoin called auroracoin was distributed to the people of Iceland to serve as a nation-specific digital currency.

(Of course not all altcoins attempt to create an improved product. Many are pump-and-dump schemes. Someone will make a new version of bitcoin—usually tweaking minor features of the protocol—hype it as the new best thing and then cash out as soon as the coins take on a bit of value.)

Regardless, altcoins are now advancing the evolution of digital currency at a rate that bitcoin, as a relatively established project, can no longer keep pace with. Although none of these altcoins have yet flourished enough to surpass bitcoin in either value or rate of adoption, many are doing well enough to prove one point: the alternative currency experiment is far from over.

What it is
In bitcoin user payments are verified and secured by a peer-to-peer network of bitcoin “miners.” Miners use their computers to verify transactions by performing one calculation over and over with different inputs, searching for the “right” result. The first computer to find the result receives a reward of newly minted bitcoins.

In this way, bitcoin mining works a lot like a lottery, where buying more tickets will increase your chances of hitting the jackpot. In bitcoin mining, the more computing power you dump onto the network the better your chance of earning bitcoins.

As a result, bitcoin miners are engaged in an arms race. The computing power applied to the bitcoin network makes it nearly 3,000 times more powerful than the combined computational brawn of the world’s top 500 supercomputers. Consequently, in order to profit from mining you must have a very powerful computer—one specifically designed for the purpose of bitcoin mining—and you must be prepared to continually upgrade your equipment.

Many people have denounced this aspect of bitcoin as wasteful. One critic, a former Google developer named Charles Lee, came up with an alternative called litecoin that attempts to squelch the bitcoin mining race.

Litecoin verifies transactions using a calculation that makes upgrading equipment less profitable for the miner. The goal of doing this is to keep smaller miners in the game and to preserve the decentralized character of the currency’s payment network.

Litecoin transactions also clear twice as fast as bitcoin transactions, which will result in the production of twice as many coins.

Who started it
Litecoin was started by Charles Lee, a former Google employee who now works at Coinbase, a bitcoin exchange in California.

Other similar altcoins
Vertcoin and peercoin have both modified the bitcoin protocol to lessen the computing demands.

What it is
The puzzle that bitcoin miners solve is completely arbitrary and takes a long time and a lot of computing power. But it doesn’t have any application beyond verifying bitcoin transactions.

Primecoin is an altcoin that attempts to redirect this energy into useful work. Instead of performing an arbitrary calculation, miners in the primecoin network search for sequences of prime numbers called Cunningham chains.

Who started it
Like bitcoin, primecoin was created by an anonymous hacker who goes by the name Sunny King. (He also co-founded another altcoin called peercoin.)

What it is
Every digital currency has to contend with the double-spending problem. Some mechanism must exist that ensures users are not spending the same money in multiple places. Bitcoin solves this problem by recording every transaction on a public ledger, then relying on a network of computers to verify the uniqueness of each transaction. What gets lost in this design is the privacy of the users. Attached to every bitcoin is a complete history of all its previous owners.

Zerocash solves bitcoin’s privacy problem. The software uses a cryptographic algorithm called a zero-knowledge proof to make digital currency transactions completely untraceable. In zerocash transactions are still public but because of this added level of encryption it is impossible to determine who spent the coins, how many they spent and where the coins ended up.

Who started it
Zerocash was created by Matthew Green, a professor at Johns Hopkins Information Security Institute. At first he envisioned it as an added feature to bitcoin but he was unable to get bitcoin developers onboard. Green now plans on releasing it as a stand-alone currency.

Other similar altcoins
Anoncoin utilizes a previous version of the zerocash code. Darkcoin seeks to achieve anonymity by other means.

Exchange rate
Not available. Green will present his protocol at a conference next month; he has not yet launched the currency.

Mazacoin, claims to be the "national currency of the traditional Lakota Nation". This is the tribal flag of Oglala Sioux a sub-tribe of the Lakota. Image:Wikimedia Commons

MAZACOIN

What it is
This year the Oglala Lakota tribe in the Great Plains adopted its own digital currency called mazacoin. Mazacoin is similar to a lot of other altcoins out there. The main difference is that a central authority controls who gets it. Unlike bitcoins, which are created by the public, the Mazacoin Tribal Trust privately mined most mazacoins before the official launch of the currency, essentially giving the role of central bank to the trust. It is now disbursing the coins to members of the tribe and has promised to hand out a separate portion of the coins to fund businesses and charities in the community. But the trust can only control the coins that it privately mined. So, anyone in the world is free to turn on a computer and mine the remaining mazacoins.

Who started it
Mazacoin was founded by Payu Harris as part of the BTC Oyate Initiative.

Other similar altcoins
Baldur Friggiar Odinsson, an Icelander, created a geographically constrained altcoin called auroracoin and wants it to become the official currency of Iceland. He distributed it this March by creating auroracoin vouchers for every Icelander listed in the country’s national registry.

What it is
Dogecoin shows what branding can do for the adoption of a currency. The dogecoin team was inspired by an Internet meme featuring a cute and cuddly shiba inu puppy, which is now the trademark of the popular coin. The team also chose to make tons of them. There are now more dogecoins in circulation than there are bitcoins. And although they are lower in value, some people say that’s actually a good thing. Most of us do our best math to the left side of the decimal point. It’s simply a lot easier to think about 100 dogecoins than it is to think about 0.1 bitcoin. This may be one reason that dogecoin has excelled as the currency of choice for online tipping.

Who started itJackson Palmer, a hobbyist programmer living in San Francisco, and Billy Markus, a former engineer at IBM.

Similar altcoins
Coinye, named after hip-hop artist Kanye West (without his consent)

What it is
Solarcoin is a digital currency that you can only get by investing in solar energy. Cryptocurrency enthusiast Nick Gogerty came up with the idea for solarcoin as a way to encourage people to go solar and to pay them back in some small way. Together with the SolarCoin Foundation he started a completely new digital currency. The foundation holds 99.4 percent of all the coins that will ever exist—the rest will be mined by the public—and they are now giving them out to anyone who can prove they have added solar electricity to the grid.

For now, the handouts act as a reward—a little token of thanks—to the people who are already doing their part for the environment. But Gogerty hopes that the project will function as much more in the future. He would like to see solarcoins take on enough value that the grants add a real economic incentive to the renewable energy market. And he hopes that even people who do not generate solar energy will begin to use the currency as a way to support the movement and increase the coin’s value.

Who started it
Solarcoin was released this January by a group of volunteers who together form the SolarCoin Foundation.

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